The following trading account is extracted from the income statement for the year ending 31 December 2011 and is given to you by the owner of the business, M. Pole:

Pole says that normally he adds 20% to the cost of goods to fix the sales price. However, this year there were some arithmetical errors in these calculations.

(a) Calculate what his sales would have been if he had not made any errors.

(b) Given that his expenses remain constant at 9% of his sales, calculate his net profit for the year 2011.

(c) Work out the rate of inventory turnover for 2011.

(d) He thinks that next year he can increase his mark-up to 25%, selling goods which will cost him £260,000. If he does not make any more errors in calculating selling prices, you are to calculate the expected gross and net profits for 2012.

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Sales Less Cost of goods sold: Opening inventory Add Purchases Less Closing inventory Gross profit 34,000 237,000 271,000 (41,000) 271,400 (230,000) 41,400